The simple way Brexit could help rethink complicated VAT tax in the UK – best today news


Thanks to Brexit, the complicated Value Added Tax (VAT) in the UK may be simplified. This comes after a prominent accountancy body urged the Treasury to undertake a comprehensive review of the VAT tax in order to simplify the tax system and assess potential rate changes following Britain’s departure from the European Union.

Forecasts from the Office for Budget Responsibility indicate that this 50-year-old tax is projected to generate £187billion in revenue this year, accounting for approximately 18 percent of all receipts.

However, tax experts argue that VAT has become overly “complex” and “inconsistent”, according to The Times.

Anita Monteith, the head of taxation policy at the Institute of Chartered Accountants in England and Wales, highlighted there was now “an opportunity to consider the simplification measures that would be appropriate”.

To delve into the functioning of indirect taxes, the institute is organising a conference in London, scheduled for Monday, which will be attended by Jim Harra, the chief executive of HM Revenue & Customs, and Alex Cooksley, the head of international VAT and excise duties at the Treasury.

Although the headline VAT rate stands at 20 percent, governments have employed various rates to achieve policy objectives and support businesses.

For instance, during the pandemic, the amount paid in restaurants was temporarily reduced to 5 percent to assist the industry.

In 2021, the Prime Minister eliminated VAT on tampons, claiming it as a Brexit dividend, as a 5 percent tax had previously been imposed.

Inconsistencies within the VAT system are prevalent. Monteith cited the contrasting VAT rates of 5 percent for charging electric vehicles at home and 20 percent for utilising street charging points.

Furthermore, a scheme allowing non-EU visitors to claim tax refunds was slashed at the start of 2021, but there is mounting pressure on the Treasury to reconsider this decision.

Monteith said, pointing to a review of VAT by the now-defunct Office of Tax Simplification in 2017, which suggested reforms: “It’s all just evolved over time and you feel there is a lack of strategic oversight of the structure of this tax now. There are huge opportunities, for example, in the area of sustainability.”

As part of the reforms, the examination will focus on the reasons behind the significant number of small businesses and sole traders who intentionally stay below the threshold that requires them to register with HM Revenue & Customs (HMRC) and charge VAT for their services.

The Institute highlighted that certain business owners may resort to spreading their business activities across multiple legal entities or accepting unrecorded cash payments in order to evade VAT obligations.

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